Financial coach: the one job a robo-adviser can't do

Software can now build and run a sensible portfolio for a few pounds a year. But a robo-adviser can't be your financial coach, and that can be a big problem.

Think back to April 2025. Donald Trump's 'Liberation Day' tariffs had just landed, markets were falling hard the world over, and if you run your own money you'll know the feeling. You open the app, and the total has dropped further in a week than you'd thought possible. Everything in you says sell, before it gets worse.

What's easy to forget in a moment like that is how little of the portfolio was ever really your handiwork, or anyone's. Software built it, spread it across thousands of holdings and rebalanced it when it drifted, all for a cost so small you'd struggle to find it on a statement. And on the morning you most wanted to tear the thing up, that software had nothing to offer. It doesn't panic. It won't steady your nerve, either. It just sits there, doing exactly what you asked, while you decide whether to do something you'll spend years regretting.

If you gave up long ago on paying a professional to pick your funds, you were right to. That was never the part worth paying for. A financial coach is something else entirely — and it's the work that matters on mornings like this one.

The job you were right not to pay for

The traditional case for hiring an adviser was simple: they could choose better investments than you could. On the evidence, that case has been losing for a very long time.

Start with people doing it themselves. In one of the most-cited studies in behavioural finance, Brad Barber and Terrance Odean followed more than 66,000 households at an American discount broker in the 1990s. The ones who traded most earned 11.4 per cent a year, while the market returned 17.9 per cent. They weren't unlucky. They were busy. The more they backed their own judgement, the more of the market's return they gave back.

The professionals fare little better, and you needn't take my word for it. Take Vanguard's. Its Adviser's Alpha framework, the industry's most-cited case for hiring an adviser, no longer rests that case on beating the market at all. Where the old pitch was outperformance, Vanguard now tells advisers their value lies in planning and coaching instead. When the firm that sells to the advice industry quietly retires fund-picking as the reason to pay for advice, the argument is more or less settled.

Then there's what's happened to the price. A global tracker now costs a few pounds a year for every £1,000 invested. Software rebalances it for nothing, and the fund selection that once justified a fee is increasingly handed to an algorithm. Even in April 2025, with the tariff panic at its height, UK investors put a net £969 million into index trackers. The job you were told to pay for is being given away. The market has quietly reached the same verdict you did.

The number the industry would rather you didn't check

The industry's favourite figure for what good advice is worth deserves precisely the scepticism you brought to fund-picking. That figure is around 3 per cent a year, with behavioural coaching the single largest slice.

The 3 per cent comes from Vanguard's Adviser's Alpha framework, and its UK edition puts the coaching component alone at up to 2 percentage points a year. Read the small print, though, and the figure softens. Vanguard is candid that this isn't measured. It's a projection: a modelled comparison between a portfolio run to best practice and one that isn't, over a period the paper leaves unspecified. It's what an adviser might add in an idealised model, not what one has been shown to add in your account.

The other number you'll hear leans on Morningstar's Mind the Gap study, which tracks the shortfall between the returns funds produce and the returns investors actually pocket. Its latest US edition put that gap at 1.2 percentage points a year over the decade to the end of 2024. Substantial. But here's the catch: Morningstar itself won't pin it on bad timing. The gap, it says, reflects 'a number of factors', including how and where people use their funds, not simply losing your nerve in a crisis. And when four academics reran the same data, they found the cost of mistiming alone came to about 0.1 per cent a year. A rounding error, not a headline.

I'll be blunt about why a financial planning firm is telling you this. If the case for a coach needed an inflated number to stand up, it would be a sales pitch. It doesn't, because the real value was never a figure on a chart. It shows up somewhere the models can't reach.

The work a machine can't do

The value doesn't hide in an annual percentage. It surfaces at a handful of decision points, and they happen to be the ones a self-directed investor faces alone.

The first is working out where you're actually going. Most people who run their own money have a portfolio but not a plan. They've chosen the funds, set up the direct debit, settled on a platform. What they've rarely done is the harder, vaguer work: how much is enough, when they can afford to stop, what the money is really for. A machine will optimise towards whatever target you hand it. It won't tell you the target is wrong, or that you never set one.

The second is holding the line when it's hard. Even Vanguard's coaching guide reaches for human language here, calling turbulent markets the 'moments that matter'. Those are the mornings a machine can rebalance but can't reassure. And the danger is well documented: Bazrafshan and Stålnacke, in a 2025 working paper, find that retired investors trade more, and do worse, precisely because they finally have the time to act on every worry. Doing nothing is a skill, and it deserts you exactly when time and fear arrive together.

There's a measurable echo. In Vanguard's own survey, advised investors were about half as likely to report high financial stress as self-directed ones, 14 per cent against 27 per cent. Handle it with care: it's Vanguard's research, its own clients, and the firm admits the gap may just mean calmer, wealthier people choose advice, rather than advice creating the calm. The direction still tells you something.

'A machine can build you a portfolio, but it can't talk you out of wrecking one.'

The question worth asking on the bad mornings

Go back to that April morning, the balance sliding, the urge to sell almost unbearable. The software that built the portfolio is still there, still silent. That silence is the point. The work a machine can do, picking the funds and holding them steady, is being handed to a machine, and for next to nothing. Good. It was never the part worth paying for.

What's left is the part that was always human. The question was never whether an adviser could beat what you'd manage alone. It's who picks up the phone on the morning the market falls: a machine can build you a portfolio, but it can't talk you out of wrecking one.

What having a good financial coach looks like

'A coach who keeps you invested through one panic has likely earned years of fees in a single conversation.'

None of this means handing your portfolio to someone who promises to beat the market. It means being honest about which jobs software has already won, and which ones it can't touch. Four questions sort the coach from the salesperson.

Start with the plan, not the portfolio. A good adviser will spend the first meeting on where you're going, not on what you hold. If the conversation opens with funds rather than with how much is enough and when you can afford to stop, you're buying the part a machine already does for a few pounds a year.

Ask how they earn their fee. The honest answer is planning, discipline and coaching through the bad mornings, not stock selection or market timing. An adviser still selling outperformance in 2025 is selling the one thing the evidence, and Vanguard, have written off.

Ask what happens when markets fall. This is the job you're really paying for. You want someone who will pick up the phone in the next April, talk you out of the sell order, and remind you of a plan you agreed when you were calm. Pin down how, and how often, they will actually be in touch.

Check the cost against the value. A coach who keeps you invested through one panic has likely earned years of fees in a single conversation. A coach who charges 1

one per cent to pick funds an algorithm now picks for nothing has not. Know which one you're hiring.

Resources

Barber, B.M. and Odean, T. (2000). Trading is hazardous to your wealth: The common stock investment performance of individual investors. The Journal of Finance, 55(2), 773-806.

Bazrafshan, E. and Stålnacke, O. (2025). The role of time availability in retail trading behavior: evidence from retired investors. Working paper.

Fulkerson, J.A., Jordan, B.D., Riley, T.B. and Yan, Q. (2026). Bad timing does not cost investors 15% of their funds' returns: An examination of Morningstar's 'Mind the Gap' study. Financial Analysts Journal (published online).

Morningstar. (2025). Mind the Gap 2025 (US edition). Chicago: Morningstar.

Vanguard. (2025). Quantifying Adviser's Alpha in the UK: Putting a value on your value. Valley Forge, PA: The Vanguard Group.

Vanguard. (2025). The emotional and time value of advice. Valley Forge, PA: The Vanguard Group.

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Recommended reading

How an adviser earns their keep, and how to find one who does it well, is the subject of How to Fund the Life You Want, the book Jonathan Hollow and I wrote, now out in a newly published second edition. It covers the coaching role in depth, along with the tax, estate and planning work that surrounds it, and it walks you through choosing an adviser without being talked into the wrong one. If this article struck a chord, that's where the argument is worked out in full.